How Should Microfinance Institutions Best Fund Themselves?

The current study gathers together a large database on the funding side of Latin American microfinance institutions (MFIs), providing detailed coverage of 61 regulated MFIs in nine Latin American countries with major microfinance markets. The study goes on to examine the relative costs of the four major funding sources: deposits, borrowings and stock and bond issue. As one important aspect of this analysis, it examines the operating costs associated with deposit mobilization, based on detailed costing studies of 10 Latin American MFIs (six of which are new studies and are undertaken for this analysis). The study also examines rather comprehensively the other advantages and disadvantages of each of the four funding sources. It recommends a funding structure for both maturing and mature MFIs in both stable and unstable macroeconomic environments. Finally, the study provides numerous best practice recommendations for using each of the four major funding sources.